According to the 2011 PwC Automotive Dealer Trendsetter Survey, 30% of automotive dealers in Canada are expected to be out of the business or semi-retired in the next 12 months.
Three quarters of single point dealers surveyed expressed their plan to be completely out of their stores within 10 years, which means by 2021, there could be a complete “changing of the guard” at single point dealers across Canada, this excludes dealerships controlled by groups.
“With so many auto dealers planning to leave, the potential for further dealer consolidation and the rise in new owners is expected to be high,” says Damian Peluso, national automotive leader, PwC. “There’s going to be an unprecedented opportunity for existing dealer groups to acquire additional stores.”
The possibility of “new blood” taking over and/or acquiring new stores is also expected to increase, but 38% of current dealers are not expecting to transfer ownership to a third party.
A majority (74%) of auto dealers would like to keep the business within the family tree. Mr. Peluso says, “The reason for this may be that 87% of dealers today have more than half of their family wealth tied up in their dealerships, which includes the related real estate.”
Most dealerships won’t “stay in the family”
In spite of wanting to hand down the dealership to a family member, less than half of the dealers surveyed believe this will actually happen.
“The lack of planning and transition strategy is a contributing factor as to why the likelihood of a family succession will be unsuccessful,” says Dennis DesRosiers, President, DesRosiers Automotive Consultants. “Whether dealers are preparing to sell or not, good succession planning has never been more critical, given the economic instability we see in the world today.”
Major survey highlights include:
–Some 45% of auto retailers today do not have a succession plan. This marks little progress in the last 14 years as 48% in 1997 said they didn’t have a succession plan.
–Only 50% of dealers have a management transition plan in place.
–Fewer than 60% of current dealers have discussed their transition plans with family members. Fewer than 25% have discussed the plan with executors, 9% with Powers of Attorney.
–A little more than half (64%) of dealer principals actually understand the financial consequences of their wills.
Peluso adds, “Of those dealers who have plans in place, many of them are inadequate and incomplete. The problem stems from defining what a succession plan actually is as it means different things to different people.”
Awareness and education about succession planning is key. Peluso says, “Once dealer principals have put a plan in place they need to properly educate those impacted by the plan such as family members and employees across all levels. A lack of awareness about succession planning can lead to a less than optimal plan and significant challenges down the road.”